Commonwealth Bank faces ATO probe over R&D millions
The Australian Taxation Office is probing Commonwealth Bank over a nine-figure sum arising from tax breaks claimed by the nation’s largest company for research and development.
In a hostile environment for tax minimisation by large corporates, CBA and the ATO are wrangling over an amount ¬believed to be in excess of $100 million.
A CBA spokeswoman declined to comment on the matter, saying the bank didn’t respond to rumour or speculation.
“We regularly provide information on our tax affairs, including R&D, to the ATO and government bodies in an open and transparent manner,” she said. “We are Australian’s third-largest taxpayer, paying over $3.3 billion in federal and state taxes in the 2014 financial year. We comply with tax laws and are committed to meeting our tax obligations.”
In July 2011, the then Labor government replaced the R&D tax concession with the R&D tax incentive to redirect the benefits of the scheme from large corporations to smaller firms undertaking risky research and development.
The banking sector reportedly received millions of dollars in taxpayer support for upgrading its computer systems, while Coca-Cola Amatil received R&D tax credits for designing drink bottles, and miners claimed credits for building roads to their mines.
The replacement regime, which provided a more generous incentive but was limited by tighter definitions, is administered by the ATO and AusIndustry, with the tax office responsible for R&D-related expenditure and AusIndustry overseeing the eligibility of R&D activities.
The incentive is currently under review by both agencies as the budget comes under extreme pressure due to collapsing tax receipts from a weakening iron ore price.
In a Senate committee hearing last month, global technology ¬giants Apple, Google and Microsoft, as well as resources behemoths BHP Billiton and Rio Tinto, were lambasted over their elaborate tax minimisation schemes.
Joe Hockey responded on Tuesday night with measures to target 30 multinational companies that could be shifting their profits offshore to avoid tax, ¬despite earning billions of dollars in revenue from Australian consumers. The federal Treasurer also introduced a so-called “Netflix” tax to collect a 10 per cent GST from companies selling digital products.
Sources said yesterday the wrangle between the ATO and CBA over the R&D incentive had arisen only recently. It was wrong to characterise it as a “dispute”, at least at this stage, one source said.
The amount of money at stake is less than the $250m figure speculated by some, and in the same ballpark as Rio’s tax settlement with the ATO in relation to its Singapore operations.
Rio described the settlement to the Senate committee as “small” but ATO commissioner Chris Jordan told the committee that paying more than $100m might not be material to Rio “but it is material to the tax office”.
On Monday, The Australian revealed that ANZ Bank chief executive Mike Smith had made a promise to Mr Jordan that the bank would be a model taxpayer.
ANZ was the only major bank to put in a submission to the Senate committee on tax avoidance.
In the submission, it explained its 2013 effective tax rate of 29.3 per cent — lower than the 30 per cent corporate rate — by revealing, among other things, it had used $44m in income tax offsets, mainly related to the R&D tax concession.
